Columbus McKinnon update on Covid-19
15 April 2020
Industrial crane maker Columbus McKinnon issued a statement on the company’s actions to address the impact that COVID-19 is having on its business and markets. The company also reported preliminary revenue and backlog for the fiscal 2020 fourth quarter which ended March 31, 2020.
“During these unprecedented times, we are focused on the safety of our associates and business continuity,” said Richard Fleming, chairman and interim CEO. “Over the past 30 days, we established a COVID-19 Task Force which rolled out a communication process to keep all locations continually informed. We implemented stringent processes to reduce the spread of the virus with the goal of ensuring the safety, health and well-being of our associates and their families. As an essential business, our manufacturing facilities have continued to operate except in Mexico, where we are respecting their government’s restrictions, and Brighton, Michigan, which serves the auto industry. In all cases, staff that can work remotely continue to do so.”
Fleming said the company is operating from a strong financial position, ”but we are implementing the necessary actions to reduce our production levels and costs in response to what we expect will be a significant decline in market demand over the next several months. We will also be focused on cash generation and liquidity preservation. These actions will be guided by our Blueprint for Growth strategy and our unwavering commitment to the health and safety of our associates and to serving the needs of our customers.”
The comany’s Covid-19 actions have focused on health and safety of employees, customers and communities. The company has eliminated travel and reduced traffic in and out of its factors, implemented a remote workforce where possible, staggered shifts and lmited access to common areas while maintaining social distancing guidelines where possible and implemented additional cleaning and sanitation procedures in all operations.
In terms of cash generation and preservation, the company has reduced overhead costs in operations and achieved footprint rationalization, used furloughs to align administrative and plant staffing with the decline in demand, stepped down inventory levels, reduced capital expenditures to $5 million in the first six months of fiscal 2021 and reduced pension contributions and term loan payments to minimum required levels.
Gregory P. Rustowicz, Chief Financial Officer, commented, “Columbus McKinnon is in a strong position entering this rapid downturn in business. In addition to our strong ability to generate cash even as sales decline, we had total liquidity of $168 million as of December 2019, consisting of $84 million of cash and $84 million available on our revolver net of outstanding letters of credit. We recently drew down $25 million from the revolver for liquidity and working capital purposes, demonstrating that we have a strong, supportive bank group. We are taking additional cash preservation measures in addition to reducing our capital expenditures such as reducing our pension contribution to the minimum requirement and only making required term loan principal payments. These actions alone will protect approximately $35 million in cash in the next six months. Importantly, we have historically demonstrated an ability to generate cash through all cycles.”
The company expects that fourth quarter revenue will be in the range of $185 million to $190 million, lower than the previously expected range of $196 million to $201 million. Orders in the quarter were strong in January and February, but fell dramatically in the latter half of March directly resulting from the impact of COVID-19. As a result, backlog at March 31, 2020 increased to approximately $131.0 million from $125.3 million at December 31, 2019.
“We are taking aggressive actions to reduce costs and provide liquidity in what we expect will be a very challenged macro environment during the next several months,” Fleming said. ”While there are a few pockets of strength such as the utilities and government verticals, several industries, such as entertainment, automotive and aerospace, are being negatively impacted. We believe that we can continue to generate cash even as revenue declines due to the immediate cost reduction and working capital management actions we are taking combined with the results of our Blueprint for Growth strategy. Our strategy enabled us to simplify the business during the last few years through the 80/20 Process, reduce our cost structure and improve efficiencies. We believe that we will be well positioned for the inevitable recovery when it comes. In the meantime, we are focused on optimizing our results in this current challenging environment.”